Gresham's law in environmental protection

Ya Po Yang; Jin-Li Hu

doi:10.1007/s10018-011-0025-z

Gresham's law in environmental protection

Ya Po Yang
, Jin-Li Hu

Institute of Business and Management

Research output: Contribution to journal › Article › peer-review

3 Scopus citations

Abstract

Under incomplete environmental enforcement, the high-cost (less efficient) firm may strategically violate the environmental standard, causing the low-cost (more efficient) firm to exit the market-a phenomenon similar to Gresham's law in which bad money drives out good money. Tightening environmental regulation without increasing probability and penalties helps the high-cost firm to drive the low-cost firm out of the market. This explains why serious pollution and inefficient production co-exist in developing economies.

Original language	English
Pages (from-to)	103-122
Number of pages	20
Journal	Environmental Economics and Policy Studies
Volume	14
Issue number	2
DOIs	https://doi.org/10.1007/s10018-011-0025-z
State	Published - Apr 2012

Keywords

Detection probability
Gresham's law
Incomplete environmental enforcement
Penalties

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abstract = "Under incomplete environmental enforcement, the high-cost (less efficient) firm may strategically violate the environmental standard, causing the low-cost (more efficient) firm to exit the market-a phenomenon similar to Gresham's law in which bad money drives out good money. Tightening environmental regulation without increasing probability and penalties helps the high-cost firm to drive the low-cost firm out of the market. This explains why serious pollution and inefficient production co-exist in developing economies.",

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AB - Under incomplete environmental enforcement, the high-cost (less efficient) firm may strategically violate the environmental standard, causing the low-cost (more efficient) firm to exit the market-a phenomenon similar to Gresham's law in which bad money drives out good money. Tightening environmental regulation without increasing probability and penalties helps the high-cost firm to drive the low-cost firm out of the market. This explains why serious pollution and inefficient production co-exist in developing economies.

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KW - Incomplete environmental enforcement

KW - Penalties

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Gresham's law in environmental protection

Abstract

Keywords

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